The debtor in a confirmed Chapter 11 case filed a lawsuit in state court concerning his former and current mortgage loan servicers' handling of his mortgage, particularly with regard to the post-confirmation interest rates and the amounts collected for property taxes. A defendant removed the case to federal district court, which then referred it to the bankruptcy court as a core proceeding because a cause of action dealt with the application of the terms of the confirmed plan and confirmation order.
When a defendant filed a motion for summary judgment, the bankruptcy court determined it did not have subject-matter jurisdiction over the adversary proceeding and recommended to the district court that it withdraw the reference of the case. The bankruptcy court found that the core proceeding on which the district court based its referral – the applicable interest rate under the confirmation order – was no longer an issue. The parties agreed on the proper contractual rate of interest – but they disagree on whether the defendants actually charged that rate. That is not a core proceeding, because it can exist outside of the bankruptcy context, and it does not fall under the court's "related-to" jurisdiction as it would have no conceivable effect on the bankruptcy estate because the underlying bankruptcy case has been dismissed and there no longer is an estate.
The bankruptcy court also discussed the defendants' estoppel argument, in which they argued that the debtor failed to disclose these causes of action in the bankruptcy case and should not be able to raise them now. The bankruptcy court pointed out that the interest rate cause of action did not exist until after the plan was confirmed and could not have been disclosed during the pendency of the case. The court said the estoppel argument was "insufficient to somehow vest jurisdiction in the bankruptcy court where jurisdiction does not otherwise exist."
The bankruptcy court recommended to the district court that it deny the pending summary judgment motion because disputed issues of material fact exist.